Overview

Political Context

After 5 years of political stalemate and a mediation process led by the Southern African Development Community (SADC), presidential and legislative elections took place in Madagascar at the end of 2013. Mr. Hery Rajaonarimampianina was elected president and took office on January 25, 2014.

Following the resignation on January 12th of Prime Minister Roger Kolo and his government (which had been in office since April 2014), the President of the Republic designated General Jean Ravelonarivo as prime minister on January 14th. The new government was presented on January 25th, and includes 29 ministers and one secretary of state in charge of the national police force. Three-quarters of the ministers present in the previous cabinet have been reappointed.

Many international partners, who did not recognize the transitional government that came to power in 2009 through unconstitutional means, have normalized their relations with Madagascar in light of the last elections.

The Government of Madagascar identifies the “fight against poverty through inclusive growth” as its main objective and possesses a strategy centered on three pillars: improving governance, promoting economic recovery, and expanding access to basic social services. This strategy has been outlined in the Programme Général de l’Etat (PGE) and translated into a 2015-2019 National Development Program (Programme national de développement or PND).

Economic Overview

The macroeconomic situation remained generally stable at the end of 2014. GDP growth is estimated at 3% in 2014, mainly driven by the extractive industry and the tertiary sector. Inflation was contained at 6% despite the gradual removal of subsidies on petroleum products. The fiscal revenue to GDP ratio remains low (10.1%), well below the target in the revised state budget. Current expenditures continue to consume a large share (75%) of total public expenditures.

The country continues to rank poorly on the ease of doing business index: 163rd out of 189 countries in World Bank Doing Business 2015 report, a decrease compared to the previous year’s ranking of 157th.

Madagascar’s economy is very fragile and its capacity to absorb further shocks is at a bare minimum. Being an open economy, Madagascar is particularly vulnerable to developments in the euro zone, to which Madagascar is particularly exposed—through 80% of its tourism earnings, 50% of its exports of goods, 15% of its foreign direct investment (FDI), and other channels.

Social Context

Madagascar ranked 155th out of 187 countries in the United Nations 2014 Human Development Report and the country will not reach the United Nations Millennium Development Goals (MDG) by 2015. In particular, the MDGs for child mortality, primary education net enrollment and completion rates, and especially the eradication of extreme poverty, which in 2007 was deemed potentially achievable, can no longer be achieved.

Madagascar is also highly vulnerable to natural disasters—including cyclones, droughts and flooding. It is estimated that one quarter of the population, or approximately five million people, currently live in zones at high risk of natural disasters.

Last Updated: May 12, 2015

World Bank Group Engagement in Madagascar

The World Bank has been partnering with Madagascar since September 1963.

Following the 2009 crisis and the implementation of Operational Policy OP 7.30 (dealing with de facto governments), the World Bank undertook emergency operations to help address some of the most urgent needs in health, nutrition, education, infrastructure, and crisis response in the event of a natural disaster. These operations were laid out in the 2012 Interim Strategy Note which will be under effect until the Country Partnership Framework, currently under preparation, is presented to the Board later this year.

The World Bank’s current portfolio in Madagascar is composed of nine investment operations with a total commitment of $532 million of which $231 million has already been disbursed. This represents a disbursement ratio of 43.5%. Trade and competitiveness has the highest share in terms of commitment at 27%, followed by education at 20% and transport and information and communications technology at 15%. 

In December 2014, the World Bank Group’s Board of Executive Directors approved a total of $95 million to support Madagascar’s efforts to improve public service delivery and boost key areas for job creation. The first operation, the Reengagement Development Policy Operation (RDPO) financed by a $45 million International Development Association (IDA) credit accompanies the country’s efforts to consolidate the return to constitutional order and will provide budget support to the government to improve the efficiency and transparency of public service delivery. The second operation is a $50 million IDA credit for the first phase of the Second Integrated Growth Poles and Corridor Program (PIC2) that will help increase economic opportunities and access to enabling infrastructure services in three regions.

In recent years, the World Bank has developed an outstanding program of analytical work and has notably completed a collection of 18 Policy Notes covering all sectors which puts together a wealth of knowledge accumulated by the Bank over the last decade of engagement in Madagascar. This collection was officially launched in May 2014. Each of these policy notes has been widely discussed with various stakeholders from the government, the private sector, civil society, and academia. In addition, the Bank has completed selected pieces of major sector work in areas such as political economy of governance and aid effectiveness, health and nutrition, urbanization, and agriculture marketing.

Last Updated: May 12, 2015

The World Bank Group’s assistance strategy aims to increase investments and growth as well as improve social indicators. Our program has been able to improve lives in the following ways:

  • Across the country, 5,550 community nutrition sites were established where over one million children under five (about one-third of all children are under five years old) are regularly weighed and mothers are counseled on the health of their children;
  • 100% increase in growth of the traffic at the southeast port of Ehoala, which is partially financed by the World Bank;
  • 60,000 people in Fort-Dauphin have now access to potable water;
  • 100,000 land certificates were delivered since 2006;
  • 400,000 people benefited from cash for work projects;
  • 114 rural health centers received electricity;
  • 2,280 kilometers of roads were rehabilitated from 2006 to 2011;
  • Rice productivity doubled in the zones where the World Bank is intervening;
  • 5,000 poor families representing 16,000 children received conditional cash transfer to support their health care and education;
  • An additional 10% of the population can now have access to mobile telephony through the installation of telecom towers in remote regions.

The World Bank and a large number of development partners have also worked together since 1990 to support Madagascar’s National Environmental Action Plan (NEAP). This plan was implemented in the form of a three-phase $400 million Environment Program (EP). The engagement has yielded substantive results, including among others:

  • 75% reduction in the rate of deforestation over the past 20 years;
  • Creation of 2.4 million hectares of national parks;
  • Sustainable management of 4.5 million hectares of landscapes, primarily by non-governmental organizations (NGOs).

Last Updated: May 12, 2015

Prior to the 2009-2013 political crises, external aid represented 40% of the government’s budget and 75% of public investments. Madagascar’s four biggest donors (the World Bank, the European Commission, the United States and the African Development Bank) accounted for about 80% of official aid to the island.

During the political crisis, most donors put on hold new commitments while continuing existing humanitarian programs that are being channeled through specialized agencies or non-governmental organizations (NGOs). In light of the recent political developments, all donors are now reconsidering their assistance programs to Madagascar, including through new commitments. After five years, donors sent a strong signal by restoring budget support in 2014 after the country returned to constitutional order.

 

Last Updated: May 12, 2015


LENDING

Madagascar: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments